Private Lenders: A Quick Solution To Unexpected Financial Problems

Author: MassMortgageGroup .com | | Categories: Commercial Mortgage , First Private Mortgage , Residential Mortgage

Commercial Mortgage Toronto

Generally speaking, private mortgages are not perceived as a pleasant solution in the eyes of the majority of borrowers. This is because they are expensive in nature, but there is a reason behind the costly nature of their funds. Let’s take a closer look at why it is so and what problems can be solved by private lending solutions.

The lending market consists of a spectrum of lenders from scheduled “A” lenders and institutional lenders to sub-prime lenders and, eventually, private lenders. Usually, when it comes to borrowing secured money, there are three main qualification criteria that every lender looks at. They are property value and status, the borrowers’ credibility, and the borrowers’ income or affordability. However, the amount of weight they put on each of these matrices is what makes all these lenders different from each other.

While major banks or scheduled “A” lenders require all three criteria to be in place at the above-average level, the majority of private lenders can work with a borrower whose financial situation does not meet traditional “A” lenders. That is provided the property is in good shape, in a suitable location, and of decent value. Doing this is essential to ensure that there is enough value and buffer (equity) in the property. So, should the borrower default on their payment, the proceeds from the sale of the property can cover the lender’s loss.

Private lenders also put a lot less stress on the income and the credibility of borrowers as they are taking higher risks than “A” lenders. Similarly, as they take higher risks, they expect higher returns as well. Therefore, they charge higher to justify the risks they are taking.

On the other hand, due to their easy-going underwriting approach, private lenders are becoming handy in certain circumstances. Unlike major banks and institutional lenders, most private lenders do not require traditional documentation and are willing to work with borrowers who have bruised credit. They even offer financial solutions with a very flexible term and conditions. Overall, private money is a fast and flexible solution, especially in undesirable circumstances.

When should you choose a private lender?

As private lenders can be costly lenders, it is essential to assess your financial situation before choosing their services. To help you determine when it is the best time to acquire financing from them, we’ve listed a few situations below.

a. Private lending makes sense when you require a residential mortgage solution but happen to be self-employed, have bruised credit, or have been through a bankruptcy situation.

b. Borrowing from a private lender also makes sense when you need short term emergency money for situations such as renovations, education, marriage, power of sales situations, etc.

c. Private lenders are a good solution in case of debt consolidation to pay off various debts with a higher interest.

d. Using private lender funds is sensible for equity take out for investment or business-related purposes.

e. Private lenders can be seen as a suitable source for a down payment, investment, or support of family who are in the home buying process.

f. Choosing private lenders is suitable when constructing a custom-made property, as it is a convenient, flexible, and quick financial solution.

g. Sometimes, private lenders can be used when breaking the existing mortgage is too expensive or applying for a new mortgage is out of hand due to various reasons.

For more information on private lenders and the pros and cons of using their services, reach out to us at We specialize in residential and commercial mortgages across Scarborough, North York, Toronto, Newmarket, Richmond Hill, Aurora, and Markham, Ontario. Each of our mortgage professionals excels in one lending area. This allows the whole team to access more lenders, programs and create a convenient, one-stop-shopping environment for you and the rest of our clients.

To learn more about our mortgage programs and services, please click here. If you have questions about mortgages, please give us a call at (905) 707-9595 or get in touch with us by clicking here


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